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Buying property in Hungary: scams and pitfalls

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Everything you need to know is included in our Hungary Property Pack

More and more foreigners are considering Hungary for real estate investments, attracted by its affordability and strategic location in Europe.

But it's worth noting that navigating the property market here can be a bit of a complex journey, especially for those who aren't local residents. There are plenty of potential hurdles and hidden pitfalls along the way that could easily catch you off guard if you're not careful.

Our community of property-buying customers and our local partners have reported several common issues to us. We've listed them all in our Hungary Property Pack.

This article will give you a quick overview of some of the potential pitfalls you could face.

Is it safe or risky to invest in real estate in Hungary?

While Hungary is predominantly safe for property transactions, there's an underbelly of scams that buyers, especially foreigners, need to be cautious about.

One infamous scam is the "double contract" trick. A real-life example can be found in Budapest's District VI, a favourite among expats.

A British investor was once presented with two contracts for the same property, like the one showing a considerably lower price for official purposes and another reflecting the actual price. This under-the-table tactic might seem tempting, as it promises lower stamp duty, but it can lead to grave legal repercussions.

The charm of Budapest's District VII, with its Jewish Quarter and iconic ruin pubs, is undeniable.

Yet, buyers beware! This district showcases Hungary's love for preservation. A German couple's dream of renovating a 19th-century apartment into a modern loft was stymied by layers of bureaucratic red tape due to the building's historical status.

Multiple permits, prolonged wait times, and an unexpected plunge into local history were all part of their property journey.

Hungary's verdant countryside is enchanting. Yet, for foreign property buyers, agricultural land comes with strings attached.

A recent case highlighted an American investor's thwarted attempts to purchase a vineyard in Eger. The hitch? Direct ownership restrictions. His workaround involved setting up a local company, an endeavour that was both time-consuming and costly.

A little-known facet of Hungarian property law is the right of pre-emption.

A Canadian family learned this the hard way in Pécs. They found a quaint house only to discover that the neighbors had the first right to purchase it, a local rule rooted in maintaining community dynamics. Their dream home was snatched away, underscoring the importance of understanding local nuances.

Interactions with foreign buyers in Hungary paint a varied picture. A group of French artists who invested in studio spaces in Budapest's District V celebrated the architectural beauty and vibrancy.

Conversely, a Japanese family recounted tales of unexpected costs in rural Tihany, where utility connections were far from straightforward and significantly impacted their budget.

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Watch out for mistakes when buying property in Hungary

The concept of "vételi jog"

When buying residential property in Hungary, one specific pitfall you should be aware of relates to the 'vételi jog' (pre-emptive right).

This is a concept unique to Hungarian property law.

Vételi jog gives existing tenants or neighbors the first right to buy a property before it can be sold to someone else. This right is particularly relevant in multi-unit buildings or in areas with traditional family estates.You might encounter this situation when you find a property you want to buy, especially in cities like Budapest, or in rural areas with closely-knit communities.

If the property is part of a multi-unit building, or if it's closely surrounded by family estates, the current owner might be obligated to offer it first to these existing parties (tenants, neighbors) before selling it to you.

This pitfall is not always well-communicated by sellers or even some real estate agents, especially to foreigners. Therefore, it's essential that you inquire about any potential vételi jog attached to the property.

Failing to do so could result in a situation where you have negotiated a purchase, possibly paid a deposit, but then find out that a tenant or neighbor exercises their right to buy the property instead.

While not every property sale is affected by vételi jog, it's a relatively common issue in Hungary, especially in older, established neighborhoods or in rural areas with long-standing community ties.

Always check with your real estate agent or a local legal advisor to ensure that this right is either not applicable or has been appropriately waived before you proceed with your purchase.

"Földhivatali bejegyzés" or the land registry entry

Another unique and often overlooked aspect of buying residential property in Hungary is the 'földhivatali bejegyzés' or the land registry entry.

In Hungary, the transfer of property ownership is not complete until it has been officially recorded in the land registry (földhivatal). This process is more than a mere formality and involves several specific steps that differ from practices in many other countries.

When you purchase a property in Hungary, after signing the purchase agreement, the change in ownership must be entered into the land registry.

Until this is done, legally, you are not recognized as the new owner.

This process can take several weeks or even months, depending on the efficiency of the local land registry office and the complexity of the property's legal status.

In this context, you should be cautious about making any significant decisions or investments related to the property until the földhivatali bejegyzés is complete.

This includes renovating, renting out, or even moving into the property. If there are any legal issues or claims against the property that emerge during this period, your position as the owner might be compromised.

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"Energetikai tanúsítvány" or energy performance certificate

A third, less commonly known pitfall when buying residential property in Hungary relates to the "energetikai tanúsítvány" or energy performance certificate (EPC).

While EPCs are used in various countries, in Hungary, there are specific nuances that you need to be aware of.

In Hungary, it's mandatory to have an up-to-date energetikai tanúsítvány when selling a property. This certificate provides detailed information about the energy efficiency of the building, including aspects like insulation, heating systems, and overall energy consumption. However, the unique aspect in Hungary is the strictness regarding the validity and details of this certificate.

Before proceeding with the purchase, you should ensure that the seller provides you with a valid and recent energetikai tanúsítvány.

If the certificate is outdated or missing, the sale could be legally challenged or even invalidated. This is particularly important because, in some cases, the energy efficiency rating can significantly influence the property's value or potential renovation costs.

Moreover, in Hungary, the energy certification process is quite thorough, and sometimes, older buildings or those in rural areas may not have an up-to-date certificate, as getting one can be costly and time-consuming for the sellers.

This can lead to complications or delays in the sales process.

As a buyer, especially as a foreigner, you should insist on seeing the energetikai tanúsítvány early in the negotiation process. This will not only ensure compliance with Hungarian law but also provide you with valuable insights into the property's energy efficiency, which can impact your future utility costs and potential investment in energy-saving renovations.

Always verify the authenticity and the date of the certificate and consider consulting with a local property lawyer or a real estate expert to navigate this requirement effectively.

"Övezeti besorolás" or zoning classifications

An additional unique challenge when buying residential property in Hungary involves understanding and dealing with 'övezeti besorolás' or zoning classifications.

Hungary has a complex system of zoning laws that can significantly impact what you can and cannot do with a property.

Övezeti besorolás refers to the specific regulations that govern land use and building specifications in different areas. These regulations can be quite specific and vary greatly from one municipality to another, and sometimes even within different parts of the same city or town.

For instance, in certain areas of Budapest or in historic towns like Eger or Sopron, there might be stringent regulations regarding building renovations, extensions, or even the color you can paint a building.

Before purchasing a property, it's crucial for you to understand the zoning classification of the area and how it affects the property.

This is particularly important if you have plans for renovating, extending, or altering the property in any way. Failing to comply with these regulations can result in significant fines, legal challenges, or even the requirement to undo changes made to the property.

Additionally, these zoning classifications can impact future developments in the area that might affect the property's value or your enjoyment of it.

For instance, a quiet residential area might be rezoned for commercial use, which could lead to increased traffic and noise.

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The risks related to the "lakáskönyv"

A further unique aspect to consider when buying residential property in Hungary is the 'lakáskönyv' or the 'house book'.

This is a document that is quite specific to Hungary and holds critical importance in the property buying process.

The lakáskönyv is a detailed record of the property's history, including past ownership, renovations, and any legal issues or liens against the property. Unlike in many other countries where such information might be distributed across various documents or databases, in Hungary, the lakáskönyv serves as a comprehensive record for everything related to a particular property.

When purchasing a property, it's essential for you to review the lakáskönyv thoroughly.

It provides crucial information that can affect your legal rights as the new owner.

For instance, it might reveal past disputes over property boundaries or rights of way, or show if there have been significant structural changes to the property that might not be immediately apparent.

However, obtaining and understanding the lakáskönyv can be challenging, especially for foreigners. The document is in Hungarian and may contain legal and technical terminology that is difficult to interpret without professional help.

Moreover, some older properties may have incomplete or outdated lakáskönyv, which complicates the due diligence process.

Therefore, you are strongly advised to work with a local legal advisor or a real estate professional who can obtain and help you understand the lakáskönyv. They can ensure that all the information is up to date and accurately reflects the property's current status.

This step is vital to avoid any legal surprises after the purchase and to ensure a smooth property transaction.

The concept of "közös képviselet"

Yet another distinctive aspect to be aware of when buying residential property in Hungary is related to the 'közös képviselet' or the common representation in condominiums or apartment buildings.

This is particularly relevant if you're considering purchasing an apartment in a building with multiple units.

In Hungary, many apartment buildings and condominiums are managed by a 'közös képviselet', a body that represents the interests of all the apartment owners in the building. This entity is responsible for managing common areas, organizing repairs and maintenance, and handling financial matters like utility bills for shared services.

The unique challenge here is that the efficiency and effectiveness of the közös képviselet can vary significantly from one building to another.

In some cases, they may be very well-organized and proactive in maintaining the building, which can enhance your living experience and property value.

However, in other cases, the közös képviselet might be inefficient or even negligent, leading to problems like poor maintenance of common areas, unresolved disputes among residents, or financial mismanagement.

Before purchasing an apartment, you should thoroughly investigate the track record and reputation of the közös képviselet.

This includes understanding how the building is managed, how communal costs are shared, and how decisions are made. Speak to current residents if possible, as they can provide valuable insights into how the building is run and any ongoing issues.

Neglecting to assess the quality of the közös képviselet can lead to unexpected complications, additional costs, or dissatisfaction with your living environment.

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Awareness of the "ingatlan adásvételi szerződés" modifications

Another specific challenge you might face when buying residential property in Hungary is related to 'ingatlan adásvételi szerződés' modifications, which refers to amendments in the real estate purchase agreement.

This is a critical aspect that can often be overlooked by foreign buyers.

In Hungary, the real estate purchase agreement, or 'ingatlan adásvételi szerződés', is a legally binding document outlining the terms and conditions of the property sale. It's common for these agreements to undergo several rounds of negotiations and modifications before both parties sign.

However, the unique issue in Hungary is how these modifications are handled and their legal implications.

You need to be aware that any change or amendment to the initial agreement, even after the initial signing, must be done in writing and with the same formal requirements as the original contract. This includes changes related to the purchase price, payment terms, handover date, or any other significant terms.

Verbal agreements or informal written amendments (like emails or text messages) are not legally binding and can lead to misunderstandings or disputes later.

Moreover, the process of modifying the contract can be complex and may require additional legal and administrative steps, such as re-registration with the land registry or notifying financial institutions involved in the transaction.

As a buyer, especially one not familiar with Hungarian legal practices, you should ensure that all agreements and any subsequent changes are properly documented and legally vetted.

Work closely with a local lawyer who specializes in real estate transactions to guide you through this process.

Issue of "társasházi alapító okirat"

An additional, often unexpected aspect of buying residential property in Hungary that you should be aware of is related to 'társasházi alapító okirat', or the condominium foundation document.

This is particularly relevant if you're considering purchasing an apartment in a multi-unit building.

The társasházi alapító okirat is a legal document that outlines the rules and regulations governing the condominium or apartment complex.

It includes details on the ownership and use of common areas, the distribution of maintenance and repair responsibilities, and the rights and obligations of individual apartment owners. This document is crucial because it can significantly impact your rights as a property owner and your daily life in the condominium.

In Hungary, each condominium has its own unique alapító okirat, and the stipulations can vary widely. Some may have strict rules regarding renovations, noise levels, or the use of common spaces.

Others might impose specific obligations on property owners for maintaining the building or contributing to a common fund.

Before purchasing an apartment, you should thoroughly review the társasházi alapító okirat.

It's important to understand how these rules and regulations align with your lifestyle and plans for the property. For instance, if you plan to renovate your apartment, you'll need to check whether the alapító okirat allows for the changes you have in mind.

Neglecting to understand the implications of the alapító okirat can lead to disputes with other residents or the condominium management, and can even result in legal challenges. It's advisable to work with a local real estate lawyer who can help you interpret this document and advise you on its implications for your property purchase.

They can ensure that you are fully informed about your rights and responsibilities as part of the condominium community.

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"Használati megállapodás" or the usage agreement

A unique and crucial aspect to consider when purchasing residential property in Hungary is understanding the implications of 'használati megállapodás', or the usage agreement, especially in cases of shared property ownership.

This is particularly relevant in situations where you are buying a property that is part of a larger estate or complex, or when purchasing a property with shared common areas or facilities.

The használati megállapodás is an agreement that outlines the rights and responsibilities of different parties in the use of shared or common areas.

This could include aspects like access rights, maintenance duties, and usage rules for shared facilities like gardens, driveways, or even structural elements of a building.

In Hungary, such agreements are vital to prevent disputes among co-owners or between owners and other residents. For example, if you're buying an apartment in a building with a shared courtyard, the használati megállapodás should clearly state who can use the courtyard, how it should be maintained, and any restrictions on its use.

However, these agreements can be complex and might contain clauses that are not immediately apparent or easy to understand, especially for foreigners.

They might also contain restrictions or obligations that could affect your enjoyment of the property or lead to unexpected responsibilities.

Before finalizing your purchase, it's essential to review the használati megállapodás thoroughly. You should understand exactly what you are agreeing to, particularly in terms of maintenance obligations, costs, and usage rights.

Ensure that this agreement is reviewed by a legal professional, preferably one who specializes in Hungarian property law, to provide clarity and guidance.

"Agrár-kamara tagság" or agricultural chamber membership

When buying residential property in Hungary, be aware of the complexities surrounding 'agrár-kamara tagság', or agricultural chamber membership, particularly when purchasing rural or agricultural land.

In Hungary, ownership of certain types of agricultural land requires membership in the local agricultural chamber.

This requirement often catches foreign buyers unaware, especially those interested in rural properties or farms.

The agricultural chamber plays a role in regulating agricultural activities, and membership can entail specific obligations and responsibilities, like adherence to agricultural practices, payment of membership fees, and participation in chamber activities.

Before purchasing agricultural property, ensure you understand the implications of agrár-kamara tagság. Check whether the property requires chamber membership and what that entails.

Failing to comply with these requirements can result in legal issues or restrictions on your use of the land.

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